Microsoft has initiated a new round of layoffs on Tuesday, affecting approximately 500 employees primarily in its Xbox gaming division, with a small number of roles in other units including Cloud + AI. As reported by Business Insider, this follows the company's July announcement of 2.1% of its global workforce, or about 4,800 employees at the time. The latest cuts represent the continuation of Xbox's comprehensive restructuring efforts, with the division working through a plan to eliminate roughly 20% of its workforce by the end of Microsoft's fiscal year. Xbox Chief Content Officer Matt Booty announced the news, expressing gratitude for colleagues' contributions while acknowledging the difficulty of the transition for affected employees and their teams. The restructuring measures carried out since July, including the divestment of studios, have now completed roughly 75% of the previously announced process.
The reorganization places Activision, which Microsoft acquired for $69 billion, in a central leadership position for Xbox's game development strategy. As reported by The Verge, Activision will now oversee the development of the next Halo title and manage two additional studios: Rare and World's Edge. Microsoft's Halo Studios will continue operating existing Halo games but will still face staff reductions, with its main task now being supporting the Halo community and games in-market, including Halo: Infinite and the freshly released Halo: Campaign Evolved. Separately, Microsoft's Bethesda will acquire Obsidian studio, which will continue working on Grounded and develop a new Fallout project in collaboration with Bethesda Game Studios. The restructuring also involves Activision taking responsibility for Sea of Thieves and World's Edge, the studio behind Age of Empires. Rob Kostich, president of Activision, stated that the company has "already begun assembling a purpose-built team, unique in capability and talent" with the goal of "making the greatest Halo game ever, worthy of its universe and legacy, while staying true to what made players love it in the first place."
The layoffs address significant financial challenges facing Xbox's business model. According to Bloomberg, Xbox's profit margins have fallen sharply to just 3%, while revenue has declined over five years when excluding Activision Blizzard's contribution entirely. Microsoft acquired Activision for $75 billion in 2023, and Xbox CEO Asha Sharma has characterized the current trends as unsustainable. Sharma stated that "This cannot continue" and emphasized the need for a comprehensive business reset. The initial 1,600 job cuts Microsoft announced in July affected studios such as id Software, Obsidian, Bethesda, as well as the Xbox platform team, with the restructuring measures now completing roughly three-quarters of the previously announced process.
Microsoft's severance package in July offered laid-off US employees up to 39 weeks' base pay for most US employees with a minimum of 60 days plus additional time based on seniority and tenure, according to documents reviewed by Business Insider. The company described the reductions beyond Xbox as part of the normal course of business, with no single cause behind the layoffs, as teams reevaluated their needs while keeping a tight rein on operating expenses. The situation is more complicated for the two remaining studios, with two separate agreements for Ninja Theory falling through, requiring Microsoft to begin consultation with employees on a proposed closure while continuing to explore other paths forward. Consultation with Arkane remains underway and is expected to continue through the end of the year.
